Deal-Making For Entrepreneurs – The Triangle of Negotiation
For entrepreneurs, deal-making and negotiation skills are crucial. Being successful doesn’t only depend on great ideas and marketing skills, it also needs a network of deals which all entrepreneurs have to put in place. These include deals for funding,distribution, manufacturing, marketing and promotion, and deals with employees.
What are the three angles of negotiation?
Essentially it involves managing the three angles of negotiation or the “golden triangle” of negotiation. The three angles are negotiating state-of-mind, negotiation process, and negotiation behaviour. As an entrepreneur, you will be in great shape if you can successfully manage these three angles. Let’s discuss the three angles of negotiation.
- State of mind. Negotiation state is all about the state of mind you bring to the negotiation. Ideally, you, as well as your adversary, want to be relaxed and confident. You don’t want to be anxious. One of the key factors in building the right attitude is to have a real appreciation of the negotiating power on both sides.
It’s easy to miscalculate the number of aces you have on your side and overestimate the number of aces on your negotiating opponent. However, in most cases, the bargaining power is divided evenly between the two. This is a very important issue for entrepreneurs because they often find themselves negotiating with larger opponents. You may not have market size but you might have niche marketing power and that gives you an edge with a larger player.
- Process. Normally, there are seven stages in any negotiation. Everyone is well known with the later stages, such as bidding, bargaining and closing the deal, yet due to impatience, people often skip the earlier stages and this isn’t a good thing. The first stage, preparation, is extremely important. You need to be prepared and know who is on the other side, who will be on your side, what is the history between you, what is your ideal position, what is your bottom line, etc.
Here, entrepreneurs can have an advantage for themselves. Larger deal partners may be less prepared. A further early stage is exploring the emotional needs of both sides and seeking coinage, which can address those needs. Do they need reassurance, respect, a sense of belonging, a desire to achieve? All negotiations are driven by the emotional needs of everyone involved.You must be able to work that out.
Once you have you can arrange coinage to meet those needs, and get back what you need in return. Coinage is a concession. It feels like loose change to the giver, yet it has a high value to the other side because it meets an emotional need. Finding coinage takes creativity and imagination.
- Behaviour. Behaviour is key. There are 12 different kinds of negotiation behaviour assembled around four types:
- Push behaviour. This is all about what I want from the deal.
- Pull behaviour. This is all about what the other side wants from the deal.
- Join behaviour. This is about what we can achieve from the deal together.
- Part behaviour. This is about taking your energy out of the deal. For example, when taking a break from the negotiation.
Different kinds of behaviour suit different people and situations. Most people will default to their favourite behaviour each time. This is not enough. There are many different types of individual, some are optimists, others are pessimists. You need to be able to select the right behaviour for the right person. You can spot these different behavioural types by observing and listening and asking questions.
These are not always natural skills for entrepreneurs as they are so passionate about their project that they spend too much time talking. Entrepreneurs should not spend more than 30 percent of your time talking in any deal. If you spend more than that you won’t have any time to focus on your opponent’s behaviour. Therefore, entrepreneurs should exercise verbal restraint when it comes to negotiating. Remember, the more you say the more you give away; the less you say the more you understand…